Coby Brooks challenges widows' bid for elective share of Hooters fortune

Aug 13, 2007 @ 8:00 am

By Lisa Shidler

+ Zoom

CHICAGO — Coby Brooks, the son of the late founder and owner of the Hooters restaurant chain, is in an estate battle with his father's widow, arguing that a commonly used estate law is unconstitutional.

Robert Brooks, 69, died of natural causes in July 2006. He left $20 million to his second wife, Tami Brooks, 48. Although Ms. Brooks is to receive $1 million annually for 20 years, she is instead seeking under South Carolina law to receive an elective share of the estate, which is believed to be much higher than $20 million.

The court has yet to determine the worth of the entire estate. The restaurateur was chief executive of Hooters and a minority owner of Naturally Fresh Inc., a food producer in Atlanta.

<b>Coby Brooks: </b>Claims his stepmother isn't even entitled to the $20 million she was left in the will.
+ Zoom
Coby Brooks: Claims his stepmother isn't even entitled to the $20 million she was left in the will. (AP Images)

Mr. Brooks left 30% of the estate to a daughter he had with Ms. Brooks. His daughter is underage and can't touch her share of the estate until she turns 30.

Mr. Brooks left 30% of his estate to Coby Brooks, his 38-year-old son from his first marriage.

In addition, Mr. Brooks also passed on 10% of his estate to Clemson (S.C.) University to establish a sports college.

The rest of Mr. Brooks' estate was left to other family members and friends.

Coby Brooks and other administrators of the estate, who are business partners and friends of the late Mr. Brooks, argue that South Carolina's elective-share law is unconstitutional. They claim it violates the U.S. Constitution's equal protection clause, which requires applying laws equally to all people. The administrators argue that elective share gives spouses rights that are not extended to other people.

Useful tool

Many advisers say use of this law, which exists in most states, has become quite common for their clients, particularly in second and third marriages, and is an invaluable tool for reducing estate taxes for all beneficiaries.

“Anytime there's a state law, there's a chance it wouldn't pass constitutional muster,” said William G. Newsome III, an estate lawyer for Nexsen Pruet LLC in Columbia, S.C. If the law were deemed unconstitutional, “it would have far-reaching impacts,” Mr. Newsome said.

Advisers and estate lawyers are skeptical that this law would be considered unconstitutional because elective laws across the country have traditionally been upheld by various state courts.

South Carolina's elective share law allows the spouse to get one-third of the deceased spouse's estate in lieu of accepting what the spouse left them in the will. Laws vary from state to state and the election size can be higher or lower than one-third.

In a related battle, Coby Brooks and the other administrators argued that Ms. Brooks shouldn't even receive $20 million in inheritance because Mr. Brooks stipulated in his will that he and his wife needed to be living together. The couple resided in neighboring houses in Myrtle Beach, S.C.

The administrators of the estate are represented by Richard Smith, a lawyer with McNair Law Firm PA, based in Columbia, S.C. He declined to comment. Also representing the administrators is Kenneth Wingate, a lawyer with Sweeny, Wingate & Barrow PA, also based in Columbia, S.C. He did not return phone calls.

Ms. Brooks is represented by Melody Breeden, a lawyer with Rice, MacDonald, Winters & Breeden PA, of Myrtle Beach, S.C., who declined to comment.

Elective share laws were created to prevent widows and young children from falling into poverty by being disinherited. Such laws exist in most of the 41 states that are “separate property” states. In these states, property acquired during a marriage is not automatically owned by both spouses. In “community property” states, a surviving spouse automatically owns 50% of the assets.

The elective-share law is used quite often, particularly as second marriages have become common, Mr. Newsome said. It's also not unusual for these laws to be contested for various reasons, he said.

Mr. Newsome thinks the administrators are unlikely to win this case. “I don't think they're going

to prevail.”

Tax advantages

Using this law can also create tax advantages because any money that passes to a surviving spouse is tax-free. “It creates an estate-tax deduction and reduces dollar for dollar the taxes the other beneficiaries pay,” Mr. Newsome said.

In large estates where family members get along, a spouse may agree to take the elective share to reduce the estate taxes for other beneficiaries, said Sidney Blum, a certified financial planner and founder of GreenLight Fee Only Advisors LLC of Evanston, Ill.

“It's a post-planning option to take the elective share to reduce the taxes,” Mr. Blum said. “Maybe the estate is larger than they anticipated and they may want to take the elective share and postpone some of the taxes until the spouse's death.”

Mr. Blum said if the law were to be overturned, advisers would lose a valuable tool.

Richard E. Coakley, an estate planner with The Coakley Group, a sole proprietorship in Summerville, S.C., agrees. “I think it's an important planning tool,” he said.

Mr. Coakely said he generally deals with clients who want to treat their spouses fairly, but having the option to apply the elective-share law is beneficial.

Unfortunately, elective-share cases often become huge family battles, said Steve Hartnett, associate director of education with the American Academy of Estate Planning Attorneys in San Diego.

The biggest sticking point is determining which assets are considered part of the estate. In some states, trusts are not considered part of the probate estate and the spouse's elective share would not include the assets in the trusts, Mr. Hartnett said.

“Some states allow the elective share against non-probate assets and some don't allow those assets,” he said.

For example, Florida changed its law in 2002 and now assets held in trusts are considered part of the elective share, said Ruth L. Forehand, a certified financial planner with Financial Advisory Consultants LLC in Naples, Fla.

If assets are held in irrevocable trusts in Florida, they are still subject to the elective share law, she said.

If clients do want to leave their spouses less than the elective share, they need to consider prenuptial and postnuptial agreements that would hold up in court against the elective share, Ms. Forehand said.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

RIA Data Center

Use InvestmentNews' RIA Data Center to filter and find key information on over 1,400 fee-only registered investment advisory firms.

Rank RIAs by

Upcoming Event

Oct 17

Conference

Best Practices Workshop

For the fifth year, InvestmentNews will host the Best Practices Workshop & Awards, bringing together the industry’s top-performing and most influential firms in one room for a full-day. This exclusive workshop and awards program for the... Learn more

Featured video

Events

Beyond coding: Behind the scenes of Fuse 2017

Fuse is a one-of-a-kind event where developers from various fintech firms come together and work towards a common goal. Although the nights are long, a ton of innovation comes out of the event, as everyone has a bit of fun along the way.

Video Spotlight

Are Your Clients Prepared For Market Downturns?

Sponsored by Prudential

Recommended Video

Path to growth

Latest news & opinion

10 best financial adviser jokes

How many financial advisers does it take to screw in a lightbulb?

With margins crashing, broker-dealers look to merge: report

Increased regulation is straining profit margins among broker-dealers, sending many of them into the arms of their bigger brethren.

Hackers may have profited from SEC breach

The hack of the agency's Edgar filing system occurred in 2016, but the regulator didn't conclude until last month that the cybercriminals may have used their bounty to make illicit trades.

Top 10 financial firms ranked by investor satisfaction

Find out which firm took the top slot for overall investor satisfaction for the second year in a row.

What not to say to clients when the markets drop

Here's what advisers should steer clear of saying the next time stocks turn downward.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print